XAO: Down -3.88%. Ten of 10 S&P Indices were down.
S&P Indices Performance – best to worst: 1.Info.Tech: -0.18% 2.Materials: -0.43% 3.Energy: -2.02% 4.Health: -2.87 5.Utilities: -3.31% 6.Industrials: -3.46% 7.Cons.Staples: -3.47% 8.Telecomms: -4.44% 9.Cons.Discretionary: -4.81% 10.Financials: -5.61%
Other Indices: 1.Property: -4.39% 2.Financials (Ex Property): -5.84% 3.50 Leaders: -3.83% 4.Small Ordinaries: -4.85% 5.Metals and Mining: -0.12% 6.Gold Miners: +1.07%
This is the worst week since May, 2012. (Remember that?) The worst hit this week were the previous darlings like the Big Banks (e.g., Westpac -6.8%), Telecomms (Telstra -4.13%) and some of the Retailers (e.g., HVN down -6.6%, JBH down -5.8%, Myer down -6.7%, David Jones down -6.5%. The two export oriented cyclicals did relatively better. The Miners were helped a little by an improvement in the Gold Miners. This looks, however, like some switching out of the (previous) best into the (previous) worst. We haven’t, yet(?), got to the point where investors are switching out of all stocks into cash. That’s when we’ll see panic and the big guys stepping in to get some bargains.
MAJOR WORLD MARKETS INDICES ONE-WEEK PERFORMANCE
Performance of major world indices, this week: 1.Nikkei -2.82% 2.SP500 -0.99% 3.XJO -3.81% 4.DJ World -1.04% 5.Europe Top 100 -1.69% 6.China -0.52% 7.Emerging Markets -2.67%
Some overlap exists in some of these indices. DJ World is made up of about 40% American companies. Emerging Markets is made up of about 17.5% Chinese companies.
Australia was the worst performer this week, by a long shot. I joked last week: “Better face it Australia – you’re really a Third World Country.” Well – we came closer to that reality this week with the closure of Ford’s manufacturing in Australia.
(I heard a politician on television this morning, suggesting that the slack could be taken up by processing the wonderful food we grow in Australia for the 3 billion population in Asia. I was recently in Cambodia and Vietnam. I saw plenty of poor people, but no starving millions, and heaps and heaps of fresh food in the town’s markets, and plenty of fresh food being cooked in street stalls. Good luck with that idea, Mr Australian politician. It’s probably as good as that idea of subsidising the car industry. How did that one go?)
This week’s weakness looks a bit overdone. Either the World catches up to us – or we move up closer (relatively) to the others. That doesn’t mean we’ll be up in absolute terms.
AUSTRALIAN MARKET: MONTHLY CHART – XJO
The Index is currently at 4983.5. Horizontal support lies at 4980 (round figures). The Index is down -4% for the month of May. Only final figures are important. One week to go.
The index is sitting on Support at 4980. This has history going back to 2006. So it is a very important level. If we continue down for the rest of the month, we’ll be well below support. And the recent move above can be seen as a false break.
Still – a week is a long time in the market. We have to wait until the end of the month before predicting the end of the world as we know it; i.e., a never ending bull market. (I never believed that overly optimistic prognosis.)
Indicators are currently flashing bearish signals. They can do that for months before the Index turns bearish. We follow trends in the index – indicators are just warning signs.
AUSTRALIAN MARKET: WEEKLY CHART – XJO
The XJO was down this week, -3.81%.
The chart has broken the uptrend line from November, 2012, but is sitting on support at 4980. Even if that breaks we still have support of the trough back recently at 4890 – not far away. There are three different supports in that area – horizontal, oblique and Moving Average. They will almost certainly cause at least a pause in proceedings if the Index gets down that far. If (when) they break, we’re in deep doo-doo.
Indicators are all showing negative divergences. The Index has turned down and this is looking increasingly like April, 2011. (Analogues don’t always work out.)
The market has reached extreme oversold levels. Rarely do we see readings like those on the RSI and CCI without a relief rally occurring. Given that the market is also at important support levels (see chart), I’d say this is a “gimme”. We’ll see next week.
AUSTRALIAN MARKET DAILY CHART – METALS AND MINERS.
The XMM (Metals and Miners) finished at 3095.4, down marginally on the week, -0.15%.
Support: 3070(round numbers). Resistance: 3233. (The recent high.)
Indicators: 1.MACD Histogram. Below zero. Negative. 2.MACD. Above zero. Positive. 3. RSI.9 is at 46.7. Below its mid-line. 4.Stochastic. 51. Mid-range. An area where reversals can occur. 5.CCI.14: -69.9. Below zero.
The Index is now close to a triple support area. The chart pattern is a symmetrical triangle. This could break either way – but the triple support area suggests the next major move will be up. A break down through triple support would see a test of the major low at 2856.6.
AUSTRALIAN MARKET DAILY CHART – FINANCIALS x-PT
The XXJ (Financials ex-Property) finished at 6302.7, Down -5,71% for the week.
Support: 6193.5. Resistance: 6432. The Index carved through two good supports this week (6432 and 6666). Supports can easily be broken if the will is there in the market. The chart is now into a major Congestion Zone. It is most likely to find support in this area. Any move to the upside, however, must now fact formidable overhead resistance. Any move up will probably be a counter-trend move and short term.
Those extreme oversold readings make this Index ripe for a relief rally.
The Standard Error Channel from November, 2012 has now been clearly broken to the downside. This is not a little-bitty break – that wouldn’t worry bulls, but a decisive break – now bulls are worried. A new shorter term SEC is shown on the chart. Friday’s big down day broke that to the downside. Expect a move up within the new SEC.
INTERNATIONAL MARKET SP500 – DAILY
The SP500 finished at 1649.6.
Major Support: 1596.
Nearby Support: 1636.
Resistance:1655.5
Indicators: 1.MACD Histogram. Below zero. Negative. 2.MACD. Above zero. Positive. 3. RSI.9 is at 58.7. Positive. 4.Stochastic. 53.6. Mid-range – where rebounds occur. 5.CCI.14: -5.86. Mid-range.
The Index got way above the SEC on Wednesday and promptly reversed. Thursday and Friday are both reversal days (down, then up) indicating buying pressure. Those two days bounced off nearby support. If that breaks then it’s once again looking at support of the lower boundary of the SEC and the 40-Day TMA. Action of the past two days suggests a test of the recent high.
There’s a good argument that Wednesday was “the end” of this bull market. Fair enough. But the action of Thursday and Friday was not bearish. I’ll be convinced if I see a test of the recent high and then a break down through the lows of Thursday and Friday. Either way – the lows of Thursday and Friday seem to me to be the key to whether or not “the bull” is finished.
INTERNATIONAL MARKETS: JAPAN NIKKEI – QUARTERLY
This is a 30-Year Quarterly chart of the Nikkei – the Japanese benchmark index.
This week, the Nikkei hit the down trend line from 1996 – and the one-day fall was as spectacular as any recent rise, down -7.32% on Thursday. It had a good reversal day (down then up) on Friday. But I think the technical damage is done with a break of the up trend line from April, 2013.
However, we can’t discount the possibility of a break above the very long term down trend line from 1996. If that happens, Japan may be in for another Magic Decade like the 1980s. Can Abenomics be so powerful? We’ll see.
INTERNATIONAL MARKETS: GERMAN TITANS – DAILY
The Dow Jones Germany Titans 30 in USD is an index made up of the 30 largest German stocks by market capitalisation, priced in USD. (It’s a bit more complicated than that, but that’s the Coles Notes version.) It’s more or less the German equivalent of the Dow Industrial Index.
We’re still waiting on a winner to be declared in this one. The chart remains, more or less, within support and resistance. The negative divergence on the MACD worked out fine with a drop after the Index made a test of horizontal resistance and reversed down off that on Wednesday.
Wait.
INTERNATIONAL MARKETS: $US GOLD – DAILY
After the dramatic fall in the Gold Price five weeks ago, the PM made a big reversal, but within normally expected technical expectations.
The gap formed on the weekly chart by the big fall on 14 April was then filled. (The fit was perfect – to the exact cent). This is in accordance with “Gap Theory”. A sideways consolidation then occurred. This week the PM fell heavily and is now testing the recent low.
On Monday, the PM made a bold bounce off support. But it’s struggled since then. There may be more upside in this, but if this breaks support in the next week, I think we’ll see a lot more downside. That’s not a prediction, just a scenario. I think we’ll see a bit more upside on this before the next move down. US$ Gold is in a long term down trend, and until that is clearly broken to the upside, I have to think that any rally is a counter-trend rally which will fail, as all such rallies have failed since October, 2012.
INTERNATIONAL MARKETS: COPPER – DAILY
Here’s a Daily Chart for Copper from August 2012. It’s a fascinating study in parallel support/resistance – both horizontal and oblique.
There appears no doubt that the prevailing long term pressures are to the downside – with inevitable upside counter-trend rallies.
That appears to be the most likely short term scenario. The Index is sitting at the confluence of two supports (oblique and horizontal.) So the short term out look is to the upside. How far? There’s powerful overhead resistance, Oblique, Horizontal and Moving Average. So, unless we’re to see a major change in trend – not too far.
SUMMARY & CONCLUSION
On the international scene, weekly was negative. The figures: XJO, -3.81%; SP500, -0.99%; Europe Top 100, -1.69%; China, -0.52%; Nikkei,-2.82%, Global Dow, -1.04%, Emerging Markets, -2.67%. Australia was the clear loser in the past week – victim of a sharply lower AUD. Metals: Copper, -0.97%%; US$ Gold was the only winner, +2.05%. I’ve warned in the past about the negative effect this would have on our market. And once it begins to fall, the action becomes self-reinforcing. Investors pull money out of Australia, so our market falls further, so Investors pull more money out of Australia, and so on.
Of course, eventually, George Soros’s Reflexivity Principle begins to work. The goods we produce here become increasingly cheaper and cheaper – and stocks become more attractive. Then the reverse procedure begins to operate. And we’ll go up again. But that could be a long time away. Meanwhile, Ford (and who else?) stops making stuff here.
For the past year or so, the Australian market has surged upwards in a yield driven bull rally. The big banks and Telstra, in particular, have benefitted. They were hard hit in this pull back. Clearly over bought and “expensive”. The Miners this week did relatively better (but still down). They could have room to the upside, but with both Copper and Gold in long term down trends, any up movement in the Miners should be seen as counter-trend rallies.
Looking to the American market for a guide is no longer a valid strategy. The Australian market has consistently underperformed the American SP500 since the end of the GFC. Turning points in the American market (an other major world markets) are still important, however, for our market. The Americans and Europeans are both hanging on to their up trends. China is still weak, and Japan came off the boil this week. If these markets and the Metals come off the boil, it’s all down hill for us.
Our market is extremely oversold and at a major support level – some sort of relief rally is likely next week. Let’s see how it goes. But don’t expect too much out of it.
So long as we have no negative news come out during the American Long Weekend – I expect our market to rise on Tuesday and be higher by the end of the week.
Black Swans and Falling Pianos are always potential dangers.
Remember: do your own research. Make your own decisions. I hope that the information I show might help you just a little.
For daily updates – check http://redbackmarketreport.wordpress.com/
Falling pianos? You never know. Here’s what to watch for:
(From: russianmeetingplaces.com)
ETF: SLF – WEEKLY
This week I’ve continued to show the chart for XPJ – the Property Sector. I’ve mentioned before that SLF (the tracking stock for XPJ) has low liquidity which means that prices on offer are often those offered by the market maker. They offer prices with a very wide spread. If you put in an “at market” order you’ll often end up with a price which is out of kilter with the underlying instrument. This also results in distortions in the tracking stock, SLF.
Last week I said: “The Index is beginning to go berserk. This week’s candle is completely above the Standard Error Channel. RSI.9 is at its highest level in this bull market, in place since August, 2011. It’s always dangerous to call the top in a rampant bull market – but this one is looking close. Too many people are piling into this one.” And you can see the result this week. Kaboom.; down -4.8%. That’s the worst performance since September 2011 – just as this bull market was beginning and investors were still extremely nervous. Currently – they just got far too confident – and paid the price.
Still – the uptrend remains intact. Bulls won’t be concerned until the SEC is broken decisively to the downside (as we saw earlier with XXJ).
The Property Sector is an interest rate sensitive sector. It’s borrowing costs go down and investors seeking income will switch out of other instruments (e.g., bonds and bank accounts) and into Property Trusts seeking higher dividends. While the RBA is in rate cut mode, it’s difficult to see how the Property Sector can suffer a reversal of the major trend. However, if the general market falls, Property won’t be immune – although falls could be somewhat muted.
According to Comsec, SLF Dividend Yield is 4.8%. That remains good value but the lowest its been for a long time. Still – better than bank interest. Dividends are paid quarterly. Ex-dividend date was 28 March (Thursday). Dividend was .078c per share.
(SLF is the Exchange Traded Fund which tracks the performance of the Property Sector on the Australian stock market.)
ETF: WEEKLY STW
STW is the tracking stock for the ASX200.
This week the ETF was down, -3.89%. (XJO down -3.81%). The short term trend is down. The long term trend is up. The stock is now sitting on the lower edge of the SEC from July, 2012. Expect the stock to bounce here.
The ETF remains above the 30-Week TMA. Respect the trend.
Take signals from the XJO chart.
According to Comsec, Dividend Yield is 3.6%. You can probably do better in a term deposit – without any growth. Dividends are paid half-yearly. Next ex-dividend date will be at the end of June.
(STW is the Exchange Traded Fund which tracks the performance of the ASX200.)
